What is Debt Refinancing? Debt refinancing is the replacement of an existing debt by means of another debt with terms and/or conditions that are more favorable. In other words, debt refinancing refers to the replacement of existing debt with new debt. How Debt Refinancing Works Debt refinancing is commonly used to take advantage of new…
What are Pooled Funds? Pooled funds is a term used to collectively refer to a set of money from individual investors combined, i.e., “pooled” together for investment purposes. The funds are combined with the intention of benefiting from economies of scale through cost minimization. Some examples of pooled funds include, but are not limited to,…
What is the Credit-Market Debt to Disposable Income Ratio? The credit-market debt to disposable income ratio is a financial metric used to measure financial conditions in households. The ratio compares the total amount of debt held by households to the disposable income (after-tax income) of the households. The credit-market debt to disposable income ratio is…
What is Capital Preservation? Capital preservation is an investment strategy that promotes saving, i.e., preserving capital and avoiding loss of value. The strategy adopts a conservative approach towards investing specifically in “safe” short-term instruments such as savings accounts, FDIC-insured checking accounts, Treasury bills, and certificates of deposits (CDs). Key Factors in Capital Preservation 1. Levels…
What are Financial Covenants? Financial covenants are the promises or agreements entered into by a borrowing party that are financial in nature. An example of a financial covenant is when a borrowing company agrees to maintain (staying above or below) an agreed ratio, typically financial ratios such as the interest coverage ratio, total assets to…
What is All Risks Yield (ARY)? All Risks Yield (ARY) is a conventional real estate metric that uses annual rental revenue to determine the capital value of an investment. ARY comprises both gross and net yields. The net yield includes the deduction of some expenses – surveyors’ fees, management fees, repairs, running costs – which…
What are Banking Fundamentals? Banking fundamentals refer to the concepts and principles relating to the practice of banking. Banking is an industry that deals with credit facilities, storage for cash, investments, and other financial transactions. The banking industry is one of the key drivers of most economies because it channels funds to borrowers with productive investments….
What is Equity Ratio? The equity ratio is a financial metric that measures the amount of leverage used by a company. It uses investments in assets and the amount of equity to determine how well a company manages its debts and funds its asset requirements. Formula for Equity Ratio The formula for Equity Ratio is:…
What is Simple Interest vs Compound Interest? In this article, we will discuss simple interest vs compound interest and illustrate the major differences that can arise between them. Interest payments can be thought of as the price of borrowing funds in the market. They are paid by the borrower to the lender with the payment…
What are Residential Properties REITs? Residential properties REITs are REITs that own and manage residential units for renting out to tenants. Residential REITs may be categorized into either single-family or multi-family structures that are available for occupation for non-business purposes. They may include condominiums, vacation homes, student housing, apartment buildings, etc. Residential real estate REITs…
